Provisions Affecting Payroll Taxes

These provisions modify: (1) the current-law OASDI payroll tax rate of 12.4
percent (6.2 percent each for employees and employers); or (2) the contribution
and benefit base (taxable maximum), which limits the amount of earnings subject
to payroll tax and credited for benefit computation. We provide a
summary list of all options
(printer-friendly PDF version)
in this category. For each provision listed below, we provide an
estimate of the financial effect on the OASDI program over
the long-range period (the next 75 years) and for the 75th year. In
addition, we provide graphs and detailed single year tables.
We base all estimates on the intermediate assumptions
described in the
2014 Trustees Report.

Choose the type of estimates (summary or detailed) from
the list of provisions.

Eliminate the taxable maximum in years 2015 and later, and apply full 12.4 percent payroll
tax rate to all earnings. Provide benefit credit for earnings above the current-law taxable
maximum, adding a bend point at the current-law taxable maximum and applying a formula factor
of 3 percent for AIME above this new bend point.

Eliminate the taxable maximum for years 2021 and later (phased in
2015-2020), and apply full 12.4 percent payroll tax rate to all
earnings. Provide benefit credit for earnings above the current-law
taxable maximum that are subject to the payroll tax, using a secondary
PIA formula. This secondary PIA formula involves: (1) an "AIME+"
derived from annual earnings from each year after 2014 that were in
excess of that year's current-law taxable maximum; (2) a new bend point
equal to 134 percent of the monthly current-law taxable maximum;
and (3) formula factors of 3 percent and 0.25 percent below and above
the new bend point, respectively.

Apply a 2 percent payroll tax on earnings above the current-law taxable maximum for years
2017-2064, and a 3 percent rate for years 2065 and later. Do not provide benefit credit
for earnings above the current-law taxable maximum.

Eliminate the taxable maximum in years 2025 and later. Phase in elimination by taxing all
earnings above the current-law taxable maximum at: 1.24 percent in 2016, 2.48 percent in
2017, and so on, up to 11.16 percent in 2024. Provide benefit credit for earnings above
the current-law taxable maximum, adding a bend point at the current-law taxable maximum and
applying a formula factor of 5 percent for AIME above this new bend point.

Eliminate the taxable maximum in years 2020 and later. Phase in elimination by taxing all
earnings above the current-law taxable maximum at: 2.48 percent in 2016, 4.96 percent in 2017,
and so on, up to 12.40 percent in 2020. Provide benefit credit for earnings above the current-law
taxable maximum that are subject to the payroll tax, using a secondary PIA formula. This
secondary PIA formula involves: (1) an "AIME+" derived from annual earnings from each year after
2014 that were in excess of that year's current-law taxable maximum; and (2) a formula factor of
5 percent on this newly computed "AIME+".

Eliminate the taxable maximum in years 2026 and later. Phase in elimination by taxing
all earnings above the current-law taxable maximum at: 1.24 percent in 2017, 2.48 percent
in 2018, and so on, up to 11.16 percent in 2025. Provide benefit credit for earnings above
the current-law taxable maximum. Create a new bend point at the current-law taxable maximum
with a 3 percent formula factor applying above the new bend point.

Apply OASDI payroll tax rate on earnings above $400,000 starting in
2016, and tax all earnings once the current-law taxable maximum exceeds $400,000.
Provide benefit credit for earnings above the current-law taxable maximum that
are subject to the payroll tax, using a secondary PIA formula. This secondary
PIA formula involves: (1) an "AIME+" derived from annual earnings from each year
after 2015 that were in excess of that year's current-law taxable maximum; and
(2) a formula factor of 2 percent on this newly computed "AIME+".

Increase the taxable maximum each year by an additional 2 percent beginning in 2015
until taxable earnings equal 90 percent of covered earnings. Provide benefit credit
for earnings up to the revised taxable maximum.

Increase the taxable maximum each year by an additional 2 percent beginning in 2017
until taxable earnings equal 90 percent of covered earnings. Do not provide benefit
credit for additional earnings taxed.

Increase the taxable maximum by an additional 2 percent per year beginning in 2016 until
taxable earnings equal 90 percent of covered earnings. Provide benefit credit for
earnings up to the revised taxable maximum. Create a new bend point equal to the
current-law taxable maximum with a 5 percent formula factor applying above the new bend
point.

Beginning in 2022, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $200,000 in 2017, with the threshold wage-indexed after 2022. Provide
proportional benefit credit for additional earnings taxed, based on the payroll tax
rate applied to the additional earnings divided by the full 12.4 percent payroll tax rate.

Beginning in 2022, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $200,000 in 2017, with the threshold wage-indexed after 2022. Do not
provide benefit credit for additional earnings taxed.

Beginning in 2022, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $300,000 in 2017, with the threshold wage-indexed after 2022. Provide
proportional benefit credit for additional earnings taxed, based on the payroll tax
rate applied to the additional earnings divided by the full 12.4 percent payroll tax rate.

Beginning in 2022, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $300,000 in 2017, with the threshold wage-indexed after 2022. Do not
provide benefit credit for additional earnings taxed.

Beginning in 2022, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $400,000 in 2017, with the threshold wage-indexed after 2022. Provide
proportional benefit credit for additional earnings taxed, based on the payroll tax
rate applied to the additional earnings divided by the full 12.4 percent payroll tax rate.

Beginning in 2022, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $400,000 in 2017, with the threshold wage-indexed after 2022. Do not
provide benefit credit for additional earnings taxed.

Eliminate the taxable maximum for the employer payroll tax (6.2 percent) beginning
in 2015. For the employee payroll tax (6.2 percent) and for benefit credit
purposes, beginning in 2015, increase the taxable maximum by an additional 2 percent
per year until taxable earnings equal 90 percent of covered earnings.

Increase the taxable maximum such that 90 percent of earnings are subject to the payroll tax
(phased in 2015-2024). In addition, apply a tax rate of 6.2 percent for earnings above the
revised taxable maximum (phased in from 2015-2024). Provide benefit credit for earnings
taxed up to the revised taxable maximum.